What Do You Do With Leftover Money From A Home Insurance Claim?

6 Min Read
Updated Oct. 23, 2022
Written By
Victoria Araj
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Home insurance is a necessity when preventing significant financial losses caused by damage to your home. The payout from a home insurance claim can help cover the cost of repairing your home or replacing furniture or appliances. Leftover money from home insurance claims can be kept if you’re entitled to it per your policy.

Before the check is written, insurance companies send a claims adjuster to assess the damage to determine the payout amount. Having the knowledge of what your home insurance policy provides in the case of extenuating circumstances can give you the confidence that normalcy can be restored.

Key Takeaways

  • If you have a mortgage or contractor, it’s likely that they’ll have control over the home insurance claim money.
  • It’s possible to have leftover money from your homeowner insurance claim if your repairs are under budget.
  • Depending on your insurance company’s policies, you may have the rights to the leftover insurance claim money.
  • There are plenty of ways to put your leftover insurance claim money to good use, from paying down your mortgage to remodeling a room.

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How Does A Homeowners Insurance Claim Work?

In the unfortunate scenario that damage to your home occurs, home insurance payouts help curb out-of-pocket costs for the damage. Once you let your insurance company know what has happened, they take it upon themselves to assess the damage and determine the payout.

In this section we provide a step-by-step guide of what the home insurance claims process looks like starting with a brief overview of how to file a home insurance claim and ending with a transition to the payout process.

1. Assess The Situation

The first step your insurer will take once you’ve filed the claim is sending a claims adjuster in person to assess the damage. The price of the damage they decide depends on many factors such as cost of the resources needed for repair, market rates for labors and other included costs.

2. Estimate Costs Of Damage

Once the claims adjuster has viewed the damage, they meet with the contractor to determine how much the home insurance claim payout will be. If they need a second option, the claims adjuster may consult a contractor before deciding the final estimate. The process is a lengthy one, lasting from weeks to months depending on the damage.

3. Obtain Insurance Payout

Once the final estimate is determined, you or your mortgage lender will receive the first check or direct deposit. The second payout is called the replacement cost values (RCV) policy which accounts for the loss in value of the property, also known as depreciation. This also verifies to all parties that the damage has been repaired.

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How Do Insurance Companies Pay Out Claims?

In many cases, people who live in homes aren’t the sole property owners, especially if they rent or pay a mortgage. In this case, the insurance payout may not go to them and instead go to their mortgage lender, property owner or other entity. Read on to discover who receives the insurance payout claim based on the type of property ownership.

For Homeowners

Homeowners are more likely to receive the insurance payout directly since they are the owners of the property, however, this isn’t always the case. Make sure to read through the insurance company’s policies to verify. In this scenario, it is the homeowner’s responsibility to pay for the repairs with the home insurance claim payout.

For Mortgage Lenders

Those with mortgages will have their insurance payout sent to the mortgage lender. Often, a homeowner with a mortgage would have to work with the company they are mortgaging with to get the payout. They may even ask to oversee the repairs or hire a contractor themselves.

For Property Management Companies

Home insurance claims for an apartment or condo often go to the association or property management company that owns the rights to the property. This requires homeowners to request payment from the property management company and potentially get their approval for repairs.

For Contractors

In some cases, insurance companies will pay the contractor directly and not the homeowner. If an insurance provider works with their own network of repair professionals or if the claim is assigned to a general contractor on the homeowner’s behalf, it’s more likely that the money will go directly to those repairing the home and not the homeowner. 

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Can You Keep Home Insurance Claim Money?

Homeowners can keep the leftover money if there is nothing in writing saying that they must return the unused claim money. Make sure to be truthful when explaining your situation to the insurance company for the claim payout, as lying is considered insurance fraud for which the consequences are harsh.

If the homeowners receive the payout directly, this can allow them to choose cheaper contractors, resources and replacement materials. If you’re replacing personal property, you may have the freedom to choose how your items are replaced per your insurance policy.

However, if the money is going straight to the lender, you may not have access to it and therefore cannot keep anything leftover.

When Is There Excess Payout In A Claim?

When cheaper contractors, materials and replacement items are used, you may have leftover money. You can also have excess payout if you forgo repairs and instead put the blanket amount from your insurance into another expense.

Is There A Deadline To Use This Payout?

The exact deadline depends on the insurance company that you submitted your claim to, but most home insurance claims stay on record for 5 – 7 years.1

FAQs About Leftover Money From Home Insurance Claims

Can You Use the Money From a Home Insurance Claim for Something Else?

As long as it is leftover money from your home insurance claim that you are legally allowed to keep, then you can purchase what you see fit.

How Do Home Insurance Companies Pay Out Claims?

The claims are paid through the actual cash value of the damage or cost of the entire home if it’s destroyed. The following payments will be made after you show the insurers the receipt for repairs as the proof of purchase.

Can A Homeowner Profit From An Insurance Claim?

If you have leftover money from your home insurance claim that you’re allowed to keep per your insurance policy, then you can earn a profit from an insurance claim.

Who Gets The Money From A Homeowners Insurance Claim?

If you’re the owner of the home or apartment/condo, then you will most likely get the check mailed to that address or get a direct deposit. However, if you have a mortgage or contractor, the money will most likely go to the mortgage lender or contractor they hire instead.

Takeaway On Home Insurance Claims

The payout from a home insurance claim can go to different recipients depending on the ownership of your home. This makes it crucial to communicate with your insurer about what your policy entails. Damage to your home is stressful, but home insurance claim payouts can allow for a smoother return to normalcy. Protecting your home and its contents ensures that it lasts for generations to come.


1How long does a home insurance claim stay on your record?